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China’s stainless steel industry is the largest in the world, and produced 24.73 million tons in 2016 – some 54 percent of the global total. Two-thirds of the world’s nickel is used to produce stainless steel, and the key to Chinese dominance in the sector is nickel pig iron (NPI), a low-grade “dirty nickel” alloy that’s a far cheaper material than nickel itself. China’s ability to scale up its NPI production a decade ago, and rely on it in turn to manufacture stainless steel, explains much of China’s advantage in the market. It also explains much of China’s massive environmental damage.

The nickel used in NPI comes from nickel laterite ore, as opposed to the traditionally used sulfide ores. It accounts for about 70 percent of global nickel stores; nearly half of that is in Indonesia and the Philippines, key suppliers for China. In fact, a number of Chinese NPI producers operate in Indonesia to bypass both tighter environmental rules at home, and an Indonesian export ban in place since 2014. While Chinese production is falling, the climate costs are not. Apart from the open-pit laterite ore mining impacts, and the costs associated with land use, NPI manufacturing relies on energy-intensive, coal-dependent smelters spew emissions into the environment. Chinese firms operating NPI facilities are notoriously noncompliant with government regulations – that’s true across multiple regions of the country – and officials at all levels fail to enforce environmental protections.

The Henan Province is one of the most polluted regions in the China – which explains why some parts of Henan, as well as the Shandong province to the east are included in 2+26 environmental protection program. Operating in Henan is Henan Qingpu Alloy Material Co.(河南青浦合金), a joint venture company between Tsingshan Group (青山控股集团) and South Korean POSCO company. Henan Qingpu has two blast furnaces, a sintering unit and, as is often the case, its own coal-dependent power plant. Its estimated NPI production volumes in 2017 are around 400,000 tons. The company’s record of violations includes a 2016 fine of RMB 51,00 for violations that included dust contamination related to raw material handling on a FeNi production line, and illegal construction of a 300,000 ton capacity stainless steel line. In 2015, a fine of RMB 40,000 was imposed after a FeNi line continued to operate without an emissions permit. The Chinese government ranks it at yellow, the middle of a five-tier system, for regulatory compliance.

Zhanhua Weiye Nickel industry Ltd.

The Shandong Xinhai Technology Ltd (山东鑫海科技股份) firm operates in Linyi City in Shandong Province and boasts 30 percent of China’s market share. Its estimated NPI output in 2017 is around 600,000 tons, but the largest producer in China – the company goes through 6 million tons of nickel laterite ore annually – appears to do whatever it wants to achieve that. The record of violations includes a 2015 fine for launching production lines without approval, and implementing environmental protection equipment for new projects without approval. In 2014, Shandong Xinhai converted two rotating furnaces from natural gas to coal dust and built two additional coal firing furnaces without authorization. It was forced to immediately suspend FeNi production on a 300,000 ton-capacity line and remove the two extra furnaces.

Also in the Shandong city of Binzhou, (which is part of the 2+26 program), is Zhanhua Weiye Nickel industry Ltd. (炜烨镍业) with an estimated NPI production in 2017 of 450,000 tons. In 2014, it failed on waste treatment equipment and dust emissions.

Shandong Shengyang Alloy Ltd (临沂盛阳), situated in neighboring Linyi, has an estimated NPI production in 2017 of 375,000 tons. It also has a history of dust emissions violations in 2016, and a production shutdown in 2015 along with 12 air emission violations confirmed by Chinese environmental protection authorities.

The Jiangsu Delong Nickel Industry Ltd. (德龙镍业) had an estimated NPI production in 2017 of approx. 300,000 tons – if its environmental neglect doesn’t mean more shutdowns. Production at the massive facility in Yancheng was shuttered in December 2016 after Jiangsu Province officials said it failed to meet environmental approvals. That followed fines totaling RMB 1.1 million for illegal construction and a lack of environmental equipment controls. They included suspension of an on-site thermal power plant operation, a demand for missing air treatment facilities, and the reinstallation of liquid waste treatment plants that had been replaced with an underwater discharge pump. Other violations included suspension of production on a 300,000 tpy-capacity line served by 11 electric ore-melting furnaces, along with rotary furnaces and drying kilns that were not approved.

Production was set to restart in March 2017, but if previous violations are any indication, there will be more pollution problems. Prior to the shutdown of its second and third-stage operations, inspections were never completed on the first 80,000-tpy line and there was no permit for a residual-heat power generation system. Emission controls equipment including a desulphurization tower and flue gas cleaning systems were broken, while raw materials and waste slag were unsafely stored outdoors. The company’s record in China doesn’t augur well for its Indonesian operations on Sulawesi Island.

Also in Jiangsu Province is Lianyungang Huale Alloy Co., Ltd (连云港华乐合金), with a 400,000 ton estimated 2017 NPI output. The company was fined RMB 90,000 in 2015 for emissions violations, and again failed to meet air particulate matter standards in 2016.

Meanwhile, Jiangsu Baotong Nickel (江苏宝通), with an estimated 10,000-ton of nickel content NPI production this year, was fined RMB 100,000 in 2015 for failing to get the proper environmental permits for a 200,000 tons production facility.

Suqian Xiangxiang Industry Co., Ltd. (宿迁翔翔) with more than 130,000-ton of NPI output volume estimation, was fined RMB 180,000 in 2016 for emissions violations that also shut down some production. Its particulate matter readings, at 353 mg/m3, were more than four times higher than the 80 mg/m3 standard.

Fujian Dingxin Industry Ltd (福建鼎信) is a repeat environmental offender operating in China’s southeast, but it is part of the TsingShan Holding Group that also owns a 47,000 square hectare mine on Sulawesi Island, as well as a smaller mine in Zimbabwe. The facility in Fuan City has a projected NPI production in 2017 of more than 1 million tons – and major breaches in making it all. There are a total of 15 violations related to air-contaminant emissions or unauthorized construction while bypassing environmental approvals between 2012 and 2016. They include a fourfold increase in production ( from 60,000 to 240,000 tons) without approval resulting in tons of sulfuric acid in 2016, and nitrogen oxide emissions from a rotary kiln in 2012 that, at 940 mg/m3, were nearly four times the 240 mg/m3 maximum.

Fujian Desheng Nickel Industry Co., Ltd.

The company also has a lengthy history of slag and waste violations, and a serious June 2015 case of water pollution at Wanwuzhen, where Fujian Dingxin waste was pumped directly into the water. The spill threatens the environment and wildlife, but also has public health implications that outraged local activists. They accused the company of fraud on its Environmental Impact Assessment (EIA) documents, after finding a falsified list of “community representatives” speaking in favor of the project’s expansion. At least activists were harassed and later arrested on trumped-up charges.

Fujian Desheng Nickel Industry Co., Ltd. (宝钢德盛) is a Baosteel holding with company operations at Luoyuan Bay. It has projected NPI production in 2017 of around 1 million tons, also with a history of environmental violations. They include excess dioxin emissions in both 2016 and 2017. In 2016, those emissions were six times higher than maximum and forced closure of a sintering operation.

Fujian Liande (福建联德) also contributes to China’s ongoing environmental compromise in the heavily industrial Fujian Province. Its projected NPI production in 2017 is 100,000 tons, but the smaller output numbers still mean big trouble. The company was cited in 2016 for sulfur dioxide emissions resulting from control equipment failure that led to a production line shutdown. In 2015, the firm violated red-mud storage requirements that led to contamination in the storm water system as proper construction of a disposal area went unfinished, along with excessive emissions.

Guangdong Yangjiang Yichuan

Further to the southwest, the Guangxi Beihai Chengde Nickel Ltd (北海诚德镍业) has an estimated 2017 NPI production volume of 1.2 million tons – all at the cost of its poor compliance record on air emissions. The 2016 violations alone included control equipment failures ranging from bypassing the desulfurization tower, to leakages and either faulty or downright absent monitoring systems. At 865 mg/m3, the SO2 emissions were at one point more than double the 400 mg/m3 maximum.

As Chinese officials seek to enforce higher environmental standards in the fight against climate change, three NPI producers in neighboring Guangdong are feeling the heat.

Century Tsingshan (广东世纪青山镍业有限公司), another company among the Tsingshan Holdings, along with Guangdong Guangxin Suntec Metal Holdings Co (广东广青金属科技有限公司) and Guangdong Yangjiang Yichuan (阳江翌川金属科技有限公司), are in the crosshairs of environmental NGO Liangjiang Huanbao. The NGO initiated court proceedings against the NPI industry players because of severe environmental damage affecting forests, ore and waste dumping, and construction permit violations.

The people and environment to the north of Beijing-Tianjin-Hebei sensitive eco-area also face environmental damage from NPI production. Although not as heavily industrial as BTH or the Fujian Province, the Liaoning Province also has a facility with a 2017 estimate of around 80,000 tons of NPI. The Liaoning Sheng Yun Industrial Development Company (辽宁晟运实业) in Dashiqiao City built a 20,000-ton capacity FeNi line without a proper permit last year – demonstrating that across China, the NPI processes needed to feed the world’s top stainless steel industry is taking its toll even as the Chinese make strides toward a sustainable future, and the country’s leaders and plans promise better results.

Inner Mongolia to the north also has issues with Inner Mongolia Heyi Niege Composite Materials Co., Ltd. （内蒙古和谊镍铬复合材料有限公司）With its 9,000-ton projection for 2017 NPI production, it also has a history of an immediate shutdown and RMB 100,000 fine in 2015 for failure to comply with inspections and permits.